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A Review of NCCI’s Workers’ Comp Report

Posted July 27th, 2012

Each year, the NCCI (National Council on Compensation Insurance, Inc.) puts out a must-read report known as the NCCI Issues Report. It points out issues that impact the market and future for those in the workers’ compensation insurance field. This year, there were more than a few unanticipated and, largely, unwelcomed discoveries made. This review points out some of the most impactful among them.

This year’s report begins by pointing out the obvious (at least in many circles). There is a lot of uncertainty in the market today that isn’t going to magically disappear because another year has passed. In fact, the upcoming presidential elections are contributing their own levels of uncertainty into the mix. But he also mentions that the economic recovery is not a certainty. It’s that exact uncertainty that has leaders in the industry feeling certain that we are going to experience very similar disappointing facts and figures in the coming year.

The big picture in the workers’ compensation insurance industry for 2012 has revealed many things that are going to have a significant impact on what happens in the coming year and may very well shape the future of the industry as a whole.

Claims are up for the first time 13 years. This is huge news and none of it is good. Workers’ compensation depends on those numbers falling each year. Remaining stagnate, in many cases in the past, was the “worst case scenario.” No one wanted to even contemplate what it could mean if the numbers increased. Now that they have, many in the business are reeling.

Of course, by itself, that news wouldn’t be all that bad. It wouldn’t be great. But the industry could still manage to wrangle a profit from the numbers. The problem is that with the increased number of claims there is also a decrease in the yields of investments by the industry. Yields across the board are at historic lows.

The report even goes so far as to conclude that without the combination of significant improvements in investment yield and far fewer new workers’ compensation claim, the industry is not likely to see a return on capital that is fast enough or substantial enough to be helpful.

The economy is still in a recovery phase and uncertainty for the future is casting a shadow over every conceivable venture these days. However, the NCCI isn’t known for running around making claims about falling skies. The threat is one that should not be ignored. The bottom line is that there is no absolute crystal ball that can predict the future of the industry. Uncertainty abounds and fortunes can change in an instant. Work diligently to limit negative indicators while boosting positive signs and change the future of this business into one that is favorable for all.